MONEY COMMENT
Cars Gobble 25% Of Our Income

By Cliff D'Arcy
September 3, 2004

According to the latest survey from RAC Insure, rising fuel costs and higher interest rates are hitting motorists where it hurts: in our wallets and purses.

Thanks to the rising price of crude oil, annual fuel bills are climbing: up £102 for a BMW 7 Series versus £53 for a Toyota Yaris. The cost of a litre of unleaded petrol has risen 5p since March and, with the average motorist using a little over 1,300 litres per year, this means shelling out another £65 a year on fuel.

RAC Insure calculates that the typical new car costs almost £102 a week to run, taking into account the cost of fuel, insurance, maintenance, taxes and depreciation. This means that running a car costs the typical driver a whopping £5,300 a year – equal to a quarter of the average household's income after deductions. However, this report shows that weekly running costs can vary by as much as £255 between the cheapest and most expensive vehicles (the Toyota at £67 and the BMW at £322).

What's more, interest-rate rises have pushed up the cost of finance deals by 11%, which comes to £94 in extra interest for a typical car loan. However, the good news is that depreciation (where a car's value falls over time) is currently not as steep as it has been in the past.

Here's a comparison of the weekly running costs of the cheapest and most expensive cars surveyed, plus the averages calculated by RAC Insure:

(Any arithmetical discrepancies are due to rounding error.)

So, as you can see, one of the best ways to cut your motoring costs is to switch to a smaller car. After all, the weekly depreciation alone for the BMW is almost £100 more than the entire weekly cost of running the Toyota!

Alternatively, if local transport links allow, you could give up driving and, instead, switch to public transport. If you go down this route, travelling is generally cheaper but less flexible, as I've discovered in recent years. However, if this isn't an option, then check out these articles on saving money on just about every aspect of motoring, including fuel, servicing, finance and so on:

• How To Save £5,000 On Your Car
• Bargain Home And Motor Insurance
• Terrific Tips For Motorists!

More: Save money by visiting our Insurance and Personal Loan Centres | The Fool's Car-Buying Guide.